3 ways to short sell a stock and make money on the way down

Most investors are used to buying long – you buy low and sell high (or that’s the plan anyway!). Short sellers, on the other hand, sell high and then buy low – they sell a stock first believing that its price will drop, and then buy it back at a lower price once it does.

Short selling is an art that is rarely successfully practised in the investing world because it is riskier and more dangerous. Of the many successful investors that have gotten incredibly wealthy, successful long/short or short-only investors represent just about a fraction of the total.

Jim Chanos is perhaps the most famous short seller. The difference between Chanos and the likes of Ackman, Einhorn and Soros is Chanos only goes short – his Kynikos Associates fund purely focuses on short selling unlike many activist investors or global macro traders. Chanos was made famous for his …